President Makes Digital Signatures Legal

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June 30, 2000 (1:01 PM EDT)

By Mary Mosquera,

President Clinton made digital signatures legal Friday, signing into law the Electronic Signatures in Global and National Commerce Act.

The long-awaited measure is expected to spark growth in the e-commerce market and in companies marketing technologies associated with authentication and security.

"Under this landmark legislation, online contracts will now have the same legal force as equivalent paper contracts," Clinton said. "This legislation will help us to achieve the full benefits of electronic commerce."

The president signed the bill at Independence National Historical Park in Philadelphia, the site of the signing of the Declaration of Independence. Clinton signed the document manually and electronically. The law takes effect Oct. 1.

"The new law will give fresh momentum to what is already the longest economic expansion in our history, an expansion driven largely by the phenomenal growth in information technologies -- particularly the Internet," he said.

Companies will be able to contract online to buy and sell products, and collect and store transaction records that once filled up vast warehouses on servers the size of a laptop, the president said. Consumers will have the option of buying insurance, getting a mortgage, or opening a brokerage account online, without waiting days for the paperwork to be mailed back and forth.

The law does not favor one type of technology over another, so consumers will have a choice.

"This is a landmark achievement for electronic commerce," said House Commerce Committee chairman Tom Bliley (R-Va.), who helped shepherd the bill through Congress.

"It will open up the floodgates to many new transactions that consumers and businesses will be able to do online," Bliley said. "It will give consumers greater confidence and convenience when shopping online."

The e-sign law will make life easier for retailers and their customers, said Steve Pfister, vice president of government relations at the National Retail Federation.

"Use of electronic records and signatures will streamline customer service requests and save retailers millions of dollars," Pfister said.

The law will open opportunities for contract and paper-intensive industries.

"This bill provides the big push the insurance industry needed to leap into e-commerce," said Robin Raina, CEO of insurance portal ebix.com, Schaumburg, Ill.

Passage of the law is just a first step. It solves the legal standard, but not the business standard, said Marcelo Halpern, an attorney at Gordon & Glickson, Chicago.

"In the guise of taking a very technology-neutral position, it sort of punts the whole issue of what constitutes a digital signature," Halpern said.

Many states that have digital signature provisions specify characteristics for authentication and encryption security features, he said. The technology has been around for awhile, but hasn't been widely accepted because businesses didn't know why it should be used, Halpern said.

"The law opens the door to broader use of digital signatures," he said.

Companies providing the technology for use in digital signatures will use the law as a springboard for business, Halpern said.